FCC Votes to Change CableCARD Rules

The FCC voted unanimously Thursday to take another
crack at promoting a competitive market for cable digital set-tops.

The commission is making changes to its CableCARD
rules in an effort to "improve the consumer experience."

Those include ensuring that operators support
accessing switched digital video by retail devices, prohibiting box price
discrimination, requiring the option of consumer self-installation of the
cards, giving consumers information on the cost of retail vs. leased boxes,
making it easier to get retail devices to market by streamlining the testing
and certification, modifying the firewire interface on leased set-top boxes to
permit home networking, and allowing cable operators to provide basic HD boxes
with integrated security functions.

That last change follows the FCC's decision to
grant a number of waivers for those boxes because they could help drive a
market in HD sets and spur cable's transition to digital.

Cable operators will also not be able to bundle a
lease fee charge into the service of subscribers who buy a retail box.

The FCC established the CableCARD regime, which
requires cable operators to separate the channel surfing and security functions
of their set-tops, in order to spur a retail market in competition to cable's
leasing model, but so far it has failed to do so, which the FCC and industry
both concede.

The FCC's end game is to create a gateway device
that unites multichannel video programming with online content, a point FCC
Chairman Julius Genachowski made clear at the Thursday public meeting adopting
the new rules. The CableCARD changes are an interim "fix."

"We commend the Commission for its
constructive approach in adopting sensible, targeted fixes to the current
CableCARD rules that provide cable operators the necessary flexibility to
continue improving the CableCARD experience for all of our customers,"
said National Cable & Telecommunications Association President Kyle
McSlarrow in a statement.

"We agree with the Commission that implementing
these changes - including increasing options for self-installation, providing
more transparency and properly equipping technicians - will assist customers
who use retail devices that rely on CableCARDs. Our industry will work
diligently to implement these changes," he said. "We also will
continue working constructively with TiVo and other providers of retail ‘cable
ready' products to assure that our mutual customers can seamlessly enjoy all of
the cable services available to them."

TiVo had petitioned the FCC for switched digital
video support for boxes, but that petition was mooted by the FCC's decision to
make that a mandate in the new rules.

"TiVo applauds Chairman Genachowski and the FCC for ensuring that consumers using retail set-top boxes will have access to all cable programming delivered using switched digital techniques and removing pricing, installation, and other hurdles facing consumers who want a better box than is offered by their cable provider," said Tivo SVP and General Counsel Matthew Zinn in a statement. "Equal access to programming is critical to ensuring that retail boxes provide real choice to consumers. American consumers are the biggest beneficiaries of the FCC's strengthened rules requiring cable operators to accommodate subscribers using set top boxes purchased at retail and make sure that all consumers get all the channels that they have paid for. TiVo looks forward to continue working with the National Cable & Telecommunications Association and its members to assure that consumers can utilize retail products to access cable programming services as easily as using operator-supplied equipment."

NCTA also said it would work with the commission
on the all-video proposal. Part of that work will likely be to try and convince
the commission not to mandate any standard gateway, but instead to allow the
marketplace to innovate.

Commissioner Michael Copps said he hoped the FCC
would take up the all-video gateway proposal in short order, but in the meantime
he was hoping the changes would "drag the poor old ox out of the
ditch." Copps had wanted the FCC to require a line item on cable bills
breaking out the cost of leased boxes, but noted that cable ops would have to
make that information available online and in rate cards.

He said access to switched video channels should
not be a privilege, but a certainty for those paying for a package of cable
channels.

Picking up on the metaphorical comparisons of the
CableCARD regime to a difficult situation, commissioner Robert McDowell likened
it to Sisyphus, the king in Greek mythology doomed to endlessly push a boulder
up a hill without reaching the summit. He called the FCC's changes a
"workable compromise," but still left the suggestion that the boulder
could yet roll back "to the valley of unattained goals."

While he generally supported the changes, he said
he would have preferred a longer ramp-up for enforcement and was concerned
about some of the hard deadlines for the changes.

Genachowski said that the ultimate goal was to
spur innovation through the TV. He said there had been fewer innovative devices
for DTV platforms than computer or mobile. He is looking to drive that DTV
innovation as part of the longer-term strategy to unite online and traditional
TV content to drive broadband adoption.